Forming a Board of Directors

A board of directors is a group of people who have oversight of a company. They generally choose the officers of the company and its mission, and determine the salaries of the CEO and other upper management. The board may also have the right to hire and fire the leader of the company.

Forming a board of directors is a good idea for most firms. It establishes built-in accountability--but only if members of the same family do not make up the entire board. Who you choose to put on your board will speak volumes about you and your company.

Instructions

1. Research potential members. Who you choose for your board will have a big impact of how your company is run. Most experts recommend trying to get people in the top of your field, then moving down from there. For example, if you are a lawyer, you would make a list of the people who you consider to be at the top of the legal game.

2. Ask for a phone or in-person interview. It is imperative that you know who is going to be on your board. What are their goals and aspirations? What will be their level of commitment to your cause or company?

3. When you have conducted the interviews and decided who you would like to be on the board, send them a letter of invitation. The letter should discuss your vision and why you believe the recipient would be a fit for the board. Compensation should also be discussed.

4. Sign a contract: In this day and age, it is imperative that a contract be involved. A good attorney will draft one for you or tell you what should go into it. The contract should explain the offer, the terms of serving on the board and the processes for re-election and termination. What rights you assign to the board are up to you and your specific company.

5. Have the first meeting. All companies that are run by a Board of Directors are generally required to have at least one meeting per year. The minutes of the meeting are sent to the state, along with the information on the board members.

Tips & Warnings

• Put well-rounded representatives on the board. A team of all "yes" people can have a negative impact on a company.

• Don't put people on your board who do not share your vision. You will be fighting them the entire time they are on the board.